Question

Use the information below for Privett Company to answer the question that follow. Privett Company Accounts payable $ 30,000 Accounts receivable 35,000 Accrued liabilities 7,000 Cash 25,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 100,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 20,000 Property, plant, and equipment 400,000 Prepaid expenses 2,000 Based on the data for Privett Company, what is the amount of working capital? a.$113,000 b.$213,000 c.$39,000 d.$153,000

Answer 1

Answer:

A. $113,000

Explanation:

Working capital is the difference between current asset less current liabilities.

Working capital = current asset - current liabilities.

Let’s just determine how much is the current asset first.

Accounts receivable $35,000

Cash $25,000

Inventory $72,000

Marketable securities $36,000

Prepaid expenses $2,000

Total current assets $170,000

Next, let’s compute how much the current liabilities are,

Accounts payable $30,000

Accrued expenses $7,000

Notes payable (short-term) $20,000

Total current liabilities $57,000

Now, we can compute the working capital.

Working capital = $170,000 - $57,000

=$113,000

*Intangible assets, long term investments and property & equipment are all non-current assets.

*Long-term liabilities is also a non-current liability, therefore excluded in the computation.